A Time For Assessing “Strategic Opportunities”

This morning I am going to talk at Pillsbury's invitation only session for their entrepreneur clients. Bo Yaghmaie has asked several VCs to talk about situations in their portfolios where they've had to engage deeply with a company in reaction to the changing environment we are now in.

It's a good topic for sure. While I am uncomfortable talking specifically about any of our companies and the goings on inside the companies (either here or at Bo's event this morning), I will say that I think its time for all companies to assess their "strategic opportunities".

"Strategic opportunities" is often a code world for "sale process" and I think that is certainly one thing that all companies should think about. But I am talking about a more comprehensive strategic process.

We've been asking many of our companies to do a deep strategic planning process. The most developed of them already do this as a matter of practice. But many of the younger companies have been largely focused on product and engineering issues and have not stepped back and thought deeply about the big picture.

In a difficult market environment, it's time well spent. Money is tight and who knows if there will be another round of venture funding. So it's critical to step away from the product roadmap and think a bit about "what you want to be when you grow up" and set some clear goals for the business in addition to the product.

That process should also include a clear assessment of the resources required to achieve the goals and the time frame involved. Then end result should be a business plan that includes both a strategic and financial plan. The financial plan should be at least for the next 18 months and ideally a bit further than that if it's possible to see out that far.

Once that is completed, all the stakeholders can have a conversation about the economics of the plan, the risks involved, and the ideal way to capitalize the plan.

That can sometimes lead back to the "strategic opportunities" aka sale process. When founders, managers, and investors stare at the cold reality of the business plan, they sometimes conclude that the plan is better financed by a strategic buyer than the venture capital or other capital markets.

But more often, the plan is a catalyzing event for a round of financing. And in this market, that is often provided by the existing investors, who after going through the strategic process conclude that there is value in the opportunity and they are willing to see it through.

The worst place you can be in this market is out of money and without a plan. The liklihood is high that you'll be out of money at some point. Just don't be there without a plan.